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Thursday, August 1, 2013

In a case that’s been closely
watched by the insurance industry, Washington’s State Supreme Court on Thursday
affirmed
that insurers are liable for the illegal actions of their agents.

“The ruling is a big win for
consumers,” said Insurance Commissioner Mike Kreidler, whose decision the case
was challenging. “If you allow someone to do business on your behalf, it only
stands to reason that you can be held responsible for what they do.”

The case involved violations of the
state’s insurance laws in 2006 and 2007 by an insurance agency appointed by
Chicago Title Insurance Company. That agency, Land Title Co. of Kitsap County,
Inc. repeatedly offered illegal inducements to get business. The violations
included illegally “wining and dining” real estate agents, builders and
mortgage lenders with free meals, donations for a golf tournament, monthly
advertising, and Seattle Seahawks playoff game tickets.

Although Land Title was Chicago
Title’s exclusive agent in the Washington counties at issue in the case,
Chicago Title argued that it was not responsible for its agent’s actions. In a
consent order signed in 2009, the company agreed to pay a $48,334 fine if it
did not prevail in court.

“Chicago Title’s arguments were
contrary to a century of insurance law,” said Kreidler. “In order to
effectively regulate insurers and protect consumers, it’s important to hold
insurers responsible for the actions of their agents.”

Title insurance practices have long
been a concern to Kreidler, whose office in 2005 scrutinized 18
months of employee expense reports and ledgers for the largest title
companies in King, Pierce and Snohomish counties. The examination found many
cases in which the companies were providing gifts, golf tournament
sponsorships, parties, ski trips, sports tickets, meals and other inducements
to get business.

“Few people shop for title
insurance, although they certainly can,” said Kreidler. “It tends to be
included in the large stack of documents that homeowners are handed to sign. So
title companies and others in the industry are positioned to steer business to
particular insurers.”

New rules took effect in March
2009, clearly outlining what can be given. There are limits on advertising,
donations to trade associations, meals, training, leasing workspace and gifts.